EVA (Economic Value Added)
Net Operating Profit After Taxes (NOPAT) – Invested Capital x Weighted Average Cost of Capital (WACC)• NOPAT• Invested CapitalEVA = NOPAT – (WACC X Costly Capital) = (680 – 140) – (10% X 6005) = -$60.5· WACC is given as 10%· NOPAT (net operating profit after taxes) =EBIT – taxes = 680-140 = 540· Costly capital = equity + interest-bearing debt = 6005o Note: Interest-bearing debt does NOT include accounts payable (all other liabilities are included)Note: a negative value for EVA indicates that the management team destroyed value during the period.